Inland boom
CENTRAL VALLEY SMALL TOWNS CATCHING UP WITH THE COAST
By Andrew LePage
Sacramento Bee

Sure, home prices on the coast remain in the stratosphere, but now it's the little inland towns many Californians can't place that dominate the state's top five housing markets in price appreciation.

The Central Valley city of Reedley -- which proudly proclaims itself ``The World's Fruit Basket'' -- ranks No. 1 with a 68.8 percent jump in its median sale price over the past year, according to a new California Association of Realtors report.

The median home price soared from $126,750 in April 2004 to a record $214,000 last month in Reedley, a town of about 23,000 along the Kings River near Fresno.

Reedley's median price for new and resale homes combined is just a little more than half the $424,000 statewide median. The median is the point at which half of the homes sold for more and half sold for less.

``We're a wonderful little community about 10 miles from Highway 99 that's been here since the 1880s, with an identifiable downtown with brick buildings, (an) opera house,'' explained Dianne Guzman, Reedley's interim community development director. ``Fresno and Visalia have had the rapid price increase before now, and now it's getting to Reedley.''

Carol Isaak, who's been selling Reedley homes for a quarter century, said prices have jumped so far so fast that many locals have no idea what homes now fetch.

``They just have a hard time believing it,'' Isaak said. ``It's fun to go out and tell them because you used to have to fight for the higher price and now they (sellers) want a lot less than what it's worth.''

About a quarter of the town's buyers are retirees and others flush with equity from the coast, she said. But most are homeowners from Fresno, 30 miles to the northwest, and Visalia, about 30 miles to the south. They've seen sharp appreciation in the past two years and are moving to Reedley for the small-town atmosphere, good schools and more house for the money.

``It's very much like a Midwestern town,'' Guzman said.

In late February, Delano and Carmen Walters, a fortysomething couple from Chula Vista, purchased a new 3,100-square-foot home with five bedrooms, set on more than one-third of an acre in Reedley, for $380,000.

Delano Walters said that while they view the home as a good investment, it was mainly a better job that brought them to Reedley. He's a nurse anesthetist who signed a two-year contract with a hospital in Selma, about 15 miles to the west.

Walters figures the house could rise in value 40 percent to 60 percent over the next five years. Even if he stops working in the area, he said they might hold on to the property as a vacation home because they enjoy Reedley and the mountains less than a half-hour drive away.

``I kind of find it like a reprieve here, a place to get away from the hustle and bustle of the big city and be close to the outdoors, the mountains, rivers and streams,'' he said. ``If you're interested in skiing and camping, this is a nice area.''

What buyers get

The influx of buyers in Reedley means a home selling for the city's $214,000 median price would probably be a fixer-upper with three bedrooms and one bath, measuring about 1,200 square feet on a 7,000-square-foot lot, Isaak said. A year ago, she said, that amount would have bought a three-bedroom, two-bath house.

In comparison, a Sacramento County buyer with $214,000 would likely end up in a condo or half-plex measuring less than 1,100 square feet with little or no back yard.

Reedley's record price run-up in the past year was followed by big gains in the inland Southern California cities of Colton (up 64.7 percent) and Twentynine Palms (up 63 percent), according to the Realtor association report, which was based on figures from DataQuick Information Systems.

The town of Atwater, just north of Merced, ranked No. 4 with a 58.7 percent surge in its April median price, followed by a 57.5 percent rise in Rohnert Park, south of Santa Rosa.

``All of these areas in the Inland Empire and Central Valley with a lot of low-cost housing are getting two bites of the statistical apple: plain appreciation and, in addition, there's this catch-up phenomenon going on,'' said DataQuick analyst John Karevoll.

The statewide median home price rose 38 percent between the first quarter of 2002 and first quarter 2004, while Reedley's rose just 8 percent over that period, DataQuick figures show.

Guzman said growth has finally hit Reedley in a big way, with more than 900 homes approved and expected to be built over the next two years. That compares with 66 new homes built last year and a record 179 in 2003.

``Reedley being sort of the -- I won't say sleepy -- but the little bit isolated town is suddenly going through a lot of change,'' Guzman said.

Fastest-growing region

The Central Valley is the state's fastest-growing region and state demographers expect its population to double to nearly 10.5 million by 2040. About 55 percent of the gain is expected from natural population increase and 45 percent from migration into the area.

``With a large population there are always a big number of people moving up the (housing) ladder,'' said demographer Dowell Myers of the University of Southern California. ``They want to move up or they want to adjust their lifestyle, and they take advantage of their increased savings and any accrued equity increases. That potential demand is being unleashed now.''

Another force is at work across the Central Valley: Investors speculating in the housing market are helping to drive up prices. Fresno-based builder Robert Wood said investors are constantly trying to buy into his Reedley project. He's trying to keep them out, as are some other builders in the Valley who fear having to compete with investors dumping homes on the market all at once should the housing boom go bust.

``We could sell the subdivision virtually overnight if we wanted to sell to investors,'' Wood said.